A KEY selling-point for Recep Tayyip Erdogan to voters is Turkey’s economic performance. After a volatile 1990s and a huge bust in 2001, his Justice and Development (AK) government has presided over steady high growth and modest inflation. In 2010 and 2011 the economy grew by a China-like 9%, leading to serious fears of overheating.GDP growth slowed to 2% in 2012. Despite surprisingly strong first-quarter figures this week, it is likely to be only 3-4% this year, not enough to keep unemployment down in a growing population. But defenders of the government (and the central bank) maintain that Turkey has engineered a soft landing.Yet the country remains heavily dependent on capital inflows, and thus on foreign investors’ confidence. That is why the financial markets’ swoon since the protests began in Taksim Square earlier this month matters. By mid-week the Istanbul stockmarket index was down by 20% from its all-time peak on May 22nd.Mehmet Simsek, the finance minister, insists the economy is more robust than it was a decade ago. He points to a solid fiscal position (gross public debt is just 36% of GDP); low household and corporate debt; a good record of job creation;…
